A limited liability company, or “LLC”, offers a business owner the liability protections of a corporation with the tax advantages of a partnership. Each state has passed laws to regulate LLCs within them. Minnesota has enacted the Minnesota Limited Liability Company Act to provide structure and regulation to LLCs.
Each LLC registered within Minnesota must have a registered office and have a registered agent identified. A registered agent must be identified for process of service obligations. In other words, the LLC must identify someone who can receive lawsuit filing paperwork on the LLC’s behalf.
Each LLC also needs to have the words or phrase “LLC” in their title, to indicate the type of structure in the company. The name must be unique, so before filing with the Secretary of State, it is important to check and see if the name is available. It should also be noted that Minnesota does not require an Operating Agreement, like many other states require. However, they do require an Employee Identification Number (EIN) that is used for tax purposes. An EIN is also required to open a bank account and to hire employees.
As part of a LLC’s required paperwork in Minnesota each LLC must have articles of organization that contain:
- the name of the LLC;
- the address of the registered office and registered agent of the LLC;
- the name and address of each member (organizer); and
- a statement of the period of existence for the LLC.
Initial and ongoing paperwork is one of the few disadvantages of choosing the LLC business model.
As with most states, a LLC in Minnesota has many benefits. Members (organizers) of the LLC are generally protected from personal liability for the debts and obligations of the LLC. LLCs also provide for taxation at the personal, rather than the corporate, level. This means that income of the LLC is taxed as personal income to the members but not at a corporate level. As such, LLC income is only taxed once at the personal level but not at the corporate level.
The major disadvantage of an LLC is that members owe certain duties or obligations to each other. For example, members usually have a duty to disclose business opportunities to the LLC. This means that if a member is presented with a business opportunity appropriate for the LLC that member must bring the opportunity to the LLC before pursuing it away from the LLC.
If you have questions about the formation or operation of your LLC, then you should contact an experienced Minnesota business lawyer today to discuss your rights and obligations under Minnesota law.